Decomposing Firm-level Sales Variation

TY - UNPB

T1 - Decomposing Firm-level Sales Variation

AU - Munch, Jakob Roland

AU - Nguyen, Daniel Xuyen

N1 - JEL classification: F12, C24

PY - 2009

Y1 - 2009

N2 - We measure the contribution of firm-specific effects to overall sales variation within a destination and find it remarkably low. Our empirical decomposition is structurally motivated by a heterogeneity model of exporting involving destination-specific, firm-specific, and firm-destination-specific latent effects with incidental truncation. We use a highly detailed dataset with exports by products and destinations for all Danish manufacturing fi…rms. We fi…nd the contribution of firm-specific heterogeneity to within-destination sales variation varies greatly across HS6 products, and that for the median product it drives 31% of the sales variation. When we remove first-time exports from our sample, the median value increases to 40%, implying that firm-destination-specific effects are most important the first year. We conclude that while firm-specific productivity can account for some of the variation, the majority is explained by firm-destination-specific heterogeneity sources such as firm-destination-specific demand.

AB - We measure the contribution of firm-specific effects to overall sales variation within a destination and find it remarkably low. Our empirical decomposition is structurally motivated by a heterogeneity model of exporting involving destination-specific, firm-specific, and firm-destination-specific latent effects with incidental truncation. We use a highly detailed dataset with exports by products and destinations for all Danish manufacturing fi…rms. We fi…nd the contribution of firm-specific heterogeneity to within-destination sales variation varies greatly across HS6 products, and that for the median product it drives 31% of the sales variation. When we remove first-time exports from our sample, the median value increases to 40%, implying that firm-destination-specific effects are most important the first year. We conclude that while firm-specific productivity can account for some of the variation, the majority is explained by firm-destination-specific heterogeneity sources such as firm-destination-specific demand.

KW - Faculty of Social Sciences

KW - Firm heterogeneity

KW - firm-level export data

KW - truncation correction

M3 - Working paper

BT - Decomposing Firm-level Sales Variation

PB - Economic Policy Research Unit. Department of Economics, University of Copenhagen

ER -